To invest Rs.900 crore more at its upcoming R&D centre at Rohtak

With car buyers shifting their focus to diesel, India's largest carmaker Maruti Suzuki India Ltd (MSIL) on Saturday said it would invest Rs.1,700 crore to set up a new diesel engine plant at its Gurgaon complex that would become operational by mid-2013. It has also decided to pump in another Rs.900 crore at its upcoming research and development (R&D) centre at Rohtak in Haryana.

“We are going to invest Rs.1,700 crore to set up the diesel plant inside our Gurgaon manufacturing facility…this will be a brand new unit and will be owned by the company. The operations (of new plant) would begin by mid-2013 with an initial capacity of 1.5 lakh units per annum. In the first phase, we will invest Rs.950 crore. After that, we will double the capacity to 3-lakh units per year by 2014,” MSIL Chairman R. C. Bhargava told journalists after the company's board meeting. About more investment at its upcoming R&D facility at Rohtak, Mr. Bhargava said another Rs.900 crore would be spent on adding various facilities, including testing for emission and safety.

This would be over and above the Rs.1,500 crore earlier announced to set up the test track. Significantly, Maruti Suzuki has seen decline in its petrol car sales, while waiting period on its diesel cars is increasing due to growing demand.

“The petrol car sales would see a decline of 15 per cent in 2011-12. In the next fiscal, we will still witness fall in petrol car sales, but we are trying to bring down this decline to 6 per cent, which will be selling about 50,000 petrol cars less,” Mr. Bhargava said.

MSIL is expecting its diesel car sales to increase by 1.5-lakh units in 2012-13, while in the current fiscal, it would sell around 2.4-lakh units.

The company is expecting an overall growth (petrol and diesel cars together) of about 10 per cent in the next fiscal.

MSIL, at present, sources its diesel engines from Suzuki Powertrain India Ltd (SPIL) and Fiat India. To meet the growing demand for its diesel cars, SPIL is ramping up its diesel engine capacity from 2.4-lakh units to 3-lakh units annually, while MSIL has already started getting increased supply of one-lakh diesel engines per year from Fiat from January this year.

Subsidy on diesel

Noting that high subsidy on diesel was behind the spurt in diesel car sales, Mr. Bhargava said this fiscal the overall petrol vehicle sales was likely to decline by 15 per cent, while sales of diesel vehicles would go up by an impressive 35 per cent. “At present, the order backlog of diesel cars is around 4-lakh units…and if we were to add these numbers, the overall sales of diesel vehicles in the industry would have grown by 65 per cent (2012-13),” Mr. Bhargava added.

While the world is moving towards electric & clean energy cars, it is unfortunate that Maruti is investing large sums is less refined fossil fuels. The government subsidy (taxpayer's money) is for commercial traffic to help small businesses & not for upper class car buyers to pollute our cities even further. While this may benefit the company in the short run, it is a misplaced longterm investment.